American firms stand ready to invest in the Philippines next year on optimism brought about by the election of Joseph R. Biden, but policymakers here have to decide whether they will push through with the plan to introduce a new set of fiscal incentives.
Michael W. Michalak, senior vice president and regional managing director for the US-Asean Business Council, told the BusinessMirror investors from the US are eyeing the Philippines as one of their business sites in 2021. He disclosed there is renewed interest in the country as a result of the investment roadshows initiated by the economic managers.
This shift in business confidence contrasts with earlier pessimism that the Philippines stands as one of the last beneficiaries of capital exodus from China in response to the tariffs slapped by the Trump administration on Chinese imports.
“I would have to say it’s changing a bit because I was not hearing a lot of investors from our group showing interest in the Philippines last year. However, I think the passage of the CREATE bill is going to raise the chances of getting these investors to go to the Philippines,” Michalak said in an interview.
Michalak is referring to the Corporate Recovery and Tax Incentives for Enterprises Act, shortly known as the CREATE bill, which last week triggered intense deliberations among senators. The House of Representatives approved its own version nine months ago, but the measure—already renamed twice—remains controversial on account of the second key plank, i.e., rationalizing fiscal incentives besides reducing corporate income tax by 5 percent.
Michalak noted how the Philippines has to reckon with its neighbors. “I’m hearing more people saying they will take a look at the Philippines, too. Last year it was all Vietnam, which is expected, since the country has a headstart against its neighbors,” he said.
However, Michalak warned policymakers have to consider the concern of existing investors in passing the measure.
The CREATE bill, on one end, seeks to reduce corporate income tax rate to 25 percent, from 30 percent, the highest among Southeast Asian nations. On the other hand, it will lift incentives, such as the 5-percent tax on gross income paid in lieu of all local and national taxes, granted to those currently operating in the country.
“Certainly, the lowering of income tax is exciting. However, there are concerns on the existing incentives being enjoyed by the current locators there. That must be studied because it won’t make sense if you get new investments and lose your current ones,” Michalak argued.
Michalak, who was former US ambassador to Vietnam, said American investors are optimistic about opening shops outside of the US with Trump now exiting the White House.
The removal of Trump from office, and hence the entry of Biden, signals a return for Washington in the multilateral trading system, he noted. As such, it means US investors can move freely in the international arena without the fear that their president may slap protectionist rules against trading partners.
Last year, investments from the US dipped by close to 9 percent to P11.72 billion, from P12.85 billion in 2018, according to data from the Philippine Statistics Authority.
Source: https://businessmirror.com.ph/2020/11/19/us-firms-keen-on-investing-but-seek-clear-signs-on-perks/
Note: Amb. Michael Michalak will be speaking on the second day of the 9th Arangkada Philippines Forum on December 1 to 3. For more information you can visit the event website.